As of 2024, the U.S. specialty coffee and beverage market is worth $57.8 billion, with expected annual growth of 4.7% through 2028. Drive-thru and limited-service models are leading the way, growing at 6.2% annually—far outpacing traditional cafés. Since 2020, about 8,500 independent shops have closed, opening the door for chains with strong financial backing to scale rapidly. Consumer habits are also shifting. Cold drinks now make up 78% of orders at specialty chains, up from 54% in 2018, and average ticket sizes have risen 14% since 2022, hitting $7.82. While demand for premium, customizable drinks remains strong, labor costs are tightening margins. Wages for food service workers have jumped 15.7% since 2022, outpacing menu price hikes and putting pressure on operators to maintain profitability.
China’s coffee market has undergone rapid expansion over the past decade, driven by shifting consumer preferences and rising demand for diverse coffee experiences. Amid this crowded landscape, Luckin Coffee has emerged as a standout player by embracing a tech-driven, low-cost model that caters to urban consumers’ expectations of speed, convenience, and affordability. As the market continues to grow - fueled by urbanization, changing lifestyles, and possible government support – Luckin well-positioned to further innovate such as adopting immersive technologies like AR or VR, enhancing customer experience.
Luckin Coffee has broadened its product range beyond traditional coffee to include flavored drinks, non-coffee options, and snacks, however, this expansion brought operational challenges such as inconsistencies in product quality and service across stores, threatening customer satisfaction and long-term loyalty.
Now, Luckin is eyeing global markets. Its upcoming New York City launch isn’t just expansion—it’s a stress test for whether its China-born formula can translate abroad. Fast service, digital ordering, and experimental drinks are familiar to Chinese customers, but New York presents new challenges: higher labor costs, tighter margins, and different consumer expectations. Still, younger Americans are more receptive to global brands and budget options—especially in a city where coffee prices are soaring. Rival Cotti Coffee, launched by former Luckin execs, is already laying groundwork in the U.S., adding urgency.
Luckin Coffee faces intense competition across both domestic and international markets. In China, key rivals include Starbucks, the long-established premium brand, and Cotti Coffee, a fast-scaling competitor launched by Luckin’s former executives. Chains like Manner Coffee, Seesaw, NOWWA, and Algebraist Coffee compete for urban, younger consumers with boutique formats and specialty drinks. Tim Hortons China, backed by Tencent, is also expanding aggressively with localized offerings. Internationally, Luckin is up against global giants like Starbucks, Dunkin’, and Peet’s Coffee, along with fast-growing US chains like Dutch Bros. It also competes indirectly with bubble tea and hybrid beverage brands like HeyTea, Mixue Bingcheng, CoCo, and Naixue, which appeal to the same digitally savvy, Gen Z customer base.
Leading domestic coffee chain stores in China as of September 2024, based on brand index
In Q1 2025, the company delivered a strong performance, with total net revenues rising 41.2% YoY to $1.22 billion, driven by both a sharp recovery in same-store sales - up 8.1% after consecutive declines - and continued network expansion. Revenues from self-operated stores grew 41.5% to RMB6.48 billion, and partnership store revenues rose 38.0% to RMB2.08 billion. Store-level operating profit for self-operated stores jumped 244.8% to RMB1.1 billion, lifting operating margins to 17.1%. Overall, GAAP operating income turned positive at $101.5 million, compared to a loss a year earlier, while non-GAAP operating income rose to RMB864.3 million.
Net income reached RMB525.1 million, reversing last year’s RMB83.2 million loss, with earnings per ADS at RMB2.00. Despite ongoing expansion, cost discipline improved: total operating expenses increased 28.1% but fell to 91.7% of revenue, down from 101% last year, reflecting gains in efficiency, supply chain leverage, and better product mix. The company also generated strong cash flow, with RMB896.6 million from operating activities and RMB6.13 billion in cash and short-term investments on hand at quarter-end.
The company added 1,757 new stores, bringing the total to 24,097, while average monthly transacting customers increased 24% to 74.3 million.
In 2024, the coffee chain reported a 36% increase in total revenue, reaching $4.7 billion compared to $3.4 billion in 2023, driven by growth in both product sales, which rose to $3.66 billion, and partnership store revenue, which reached $1 billion. Net income saw a modest rise to $402 million, up from $395 million the previous year, though analysts expect it to reach $493 million in 2025. EBITDA stood at $650 million in 2024 and is projected to grow by 29.5% to $841 million.
Looking ahead to 2027, Luckin Coffee expects continued strong growth with revenue projected at $7.9 billion with an EBITDA of $1.18 billion while net income should reach $727 million and net margin of 9.2%
The company's ROE stood at 29.8% for 2024, lower than 43.2% in 2023. ROA decreased also from 19.8% in 2023 to 14.17% in 2024. EBITDA margin set at 13.71% in 2024 while net margin decreased from 11.44% to 8.5% over the same period. EPS of the group has risen from $1.245 in 2023 to $1.263 in 2024 and expected to reach $2.195 by 2027 and it has a debt of $36.4 millions for 2024.
Luckin Coffee currently trades at a P/E ratio of 20.3x for 2024, expected at 23.7x for 2025 and 18.3x for 2026, lower than Starbucks' 29.4x. The EV/EBITDA ratio stands at 12.7x for 2024 compared to Starbucks' 17.7x and the restaurant industry average of 12.8x. Luckin Coffee’s EV/FCF is also high standing at 33x for 2024, expected at 65.5x next year compared to 37x for Starbucks.
In conclusion, Luckin Coffee has carved out a strong position in China’s fast-growing coffee market through its digital innovation, wide store network, and responsive marketing. Yet, sustaining this momentum will depend on its ability to address internal weaknesses—particularly quality consistency—and continue adapting to an increasingly competitive landscape. By expanding into the US and embracing emerging technologies, Luckin can solidify its market leadership and build deeper, lasting connections with its customers.
